Innovations in crisis management: A comparative analysis of Brazil and Germany

by Lucé Rodrigues Souza, Master in International Tourism Management, Department of Economics, West Coast University of Applied Sciences, Germany. International Coordinator in Germany and Author of Germany for you. E-mail: lucerodriguess@gmail.com

Reviewed by Matheus Lucas Hebling

The globalization process has created a market opportunity to expand service businesses and attend diverse niche markets. The development of technology, by its turn, democratized access to knowledge and digital communication worldwide. Through online platforms, the final customer has access to the newest services and products worldwide, and, therefore, market trends and technologies are changing faster. These factors combined have been challenging the business model to create innovative strategies to meet customers’ needs and stand out among competitors (Van Riel, 2005; Dodgson, Gann, and Phillips, 2014).

Innovation Management is an organizational process that uses new methods and tools to produce a positive outcome for the enterprise (Trott, 2006 and Dogson, 2017). This approach aims to improve institutional performance by analysis and coordination of human resources and their ability. In this sense, the innovative method is characterized by risk, unpredictability, and speculation during the implementation process. Thus, there are large numbers of failures during experiences of the Innovation Management implementation process, which increased the global interest in this topic. The academic studies about Innovation Management have explored the meaning, diversity, impacts, analysis of successful and failures factors, and methods to increase the possibility of success. Besides that, researchers also analyzed the motivation behind pushing businesses to develop and implement innovations. Jean, Chiou, and Sinkovics (2016) indicate different drives to apply innovative concepts in the private sector: business habits, diversity in the workforce, know-how, and knowledge research (Dodgson, Gann, and Phillips, 2014 and Goffin, and Mitchell, 2017).

The business environment also impacts the decision-making process to boost innovation management in the economy. Economic recessions can either boost innovation as a crisis management strategy or reduce the business model’s innovative ability. Currently, the global economy is suffering, as on rare occasions in history, with a high uncertainty level caused by a world pandemic. In December 2019, the first infection of Covid-19 was announced in Wuhan, China, and the virus spread around the globe after a few months. On 27th January, Germany confirmed its first case near the Munich area in Bavaria. A few days later, on 25th February, the first person tested positive in the São Paulo capital, Brazil (M Böhmer et al., 2020 and Lancet, 2020). Due to the first registration of cases, national and regional authorities implemented some strategies such as quarantine, lockdown, border closures, and social restrictions to diminish the virus dissemination speed (IBRE, 2020 in Finkler, Antoniazzi, and De Conto, 2020 and Branicki, 2020). These news behavioral, sanitary, and technological processes have been demanding and challenging stakeholders to rethink their enterprises, enabling their survival amidst this crisis with minimal damage (OECD, 2020, Trott, 2017; Liu and Froese, 2020). Therefore, it is also crucial to examine the strategies implemented by the Brazilian and the German governments and business clusters to support the service sector to adapt their business model.     

During the last decade, the German economy has considerably grown, ranking in the fourth position in the World’s Gross domestic product (GDP) in 2019 (Statista, 2020). According to the OECD report (2020), the German economy decreased by 5,5% in 2020 due to reduced export and business activities. Consequently, it is also impacting population consumption behavior. The German authorities expect to recover the economic growth in 2021 by +2.8%. On the other hand, Brazil has suffered from hard economic recession and political instability in the last few years. The COVID-19 and the national authorities’ strategies to overcome the virus outcomes negatively impacted international business and internal consumption. The Brazilian GDP is forecast to shrink in 2020; however, the experts presume that in the following years, the economy will slightly grow by 2,68% in 2021 and 2,2% in 2022 (OECD, 2020 and World Bank, 2020). In this sense, it is relevant to analyze the innovation implemented by the Brazilian and German public and private sectors in the service industry to overcome the pandemic’s negative impacts.

Further on the matter, there is the World Intellectual property organization, a United Nations agency that focuses on analyzing and fomenting economic innovation worldwide. Annually, the agency publishes “The Global Innovation Index” (GII), a global economy classification based on innovation capabilities. According to this ranking, between 2017-2020, Germany ranks in ninth place. Brazil has improved its performance in the last few years – in 2017, it ranked 69th place, and in 2020 it increased to 62nd place (Cornell University, INSEAD, and WIPO (2020). However, some researchers have argued about a possible bias in measuring the innovations between developing economies.

For this reason, The World Bank Group investigated in cooperation with several researchers about innovation in developing economies. The project was called “Innovation Paradox,” and it investigated the external and internal factors impacting the expansion of innovative strategies in developed and developing economies. The results showed that although developing nations have a great potential to implement innovation management, the innovations’ measurement places them behind stronger economies due to the lack of economic resources and efficient policies to stimulate and monitor the innovations (Cirera and F. Maloney, 2017 and Cirera and Muzi, 2020).

Besides the measurement bias, reverse innovation is also impacting the Innovation performance of developing and emerging economies. With the lack of resources, developing countries develop low budget-innovation to attend to the market’s demand (frugal innovation). These innovations are attractive for the developed countries, and global players often import them. This practice is also called reverse innovation, and it is defined as an innovation process design in a developing country and implemented in a rich country. (Gwarda-Gruszczyńska and Agarwal, Brem and Dwivedi, 2019 and Wei and Liu, 2020)

As mentioned before, strong economies such as Germany have been performing on the top ranking of the innovation index. Nonetheless, German multinationals have been investing and importing frugal innovation from emerging economies as a business strategy in the private sector. Countries such as China, India, Brazil are the leading innovation hubs for the developed countries (Hübner, 2012, Global Health, 2020 and Agarwal and Brem 2018). For this reason, the important business associations of developing and emerging countries offer not only programs to boost innovation management, but also measure innovation development, especially between the Small and Medium entrepreneurs. 

 

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